Anheuser-Busch InBev Buys SABMiller For $104 Billion

Anheuser-Busch InBev Buys SABMiller For $104 Billion

AB InBev and SABMiller Brew Biggest Beer Merger in History.

Anheuser-Busch InBev has agreed to buy rival brewer SABMiller for a deal reportedly valued at $104.0 billion. The acquisition, which will represent the largest beer merger in history, is a new high for the Global Beer Manufacturers industry, which has struggled over the past decade with declining per capita beer consumption and relatively flat volume growth across North American and European markets. Although the specifics of the deal have not been disclosed, it is likely that antitrust concerns, particularly from the US Department of Justice, will require that SABMiller sells its stake in its North American MillerCoors joint venture with Molson Coors.

The move is a mutually beneficial merger between the two beer behemoths, which will allow the companies’ combined outreach to span throughout much of the developed world. For AB InBev, which has significant market exposure in North America and South America, consolidating with SABMiller’s distribution network will facilitate far greater brand manufacturing and distribution access throughout untapped regions in Africa and Asia. For SABMiller, the British-South African brewing company’s distribution network already spans much Africa and is expanding throughout Central Europe. The merger will fill in the two companies’ respective geographic gaps in distribution and combine to make a massive global brand portfolio that includes the likes of Budweiser, Stella Artois, Beck’s, Hoegaarden, Michelob, Foster’s, Cascade, Grolsch, Indus Pride, Leinenkugel’s, Mercury, Miller High Life, Milwaukee’s Best, Peroni, Olde English, Pilsenm Pilsner Urquell, Redd’s and many more.

The blockbuster agreement reflects the global beer market’s lackluster growth in recent years. With consumer demand stagnant and affordable beer widely available throughout much of the developed world, major beer manufacturers have been reluctant to invest significant amounts of capital into new larger distribution networks and additional manufacturing locations. As a result, merger and acquisition activity has increasingly posed an attractive alternative for these major beer manufacturers, since merging allows companies to simply consolidate preexisting distribution and manufacturing platforms without the need for costly capital investment. AB InBev’s buyout of SABMiller would, in theory, allow both companies to eliminate their largest source of competition while combining the distribution outreach of their product portfolios in the process. While redundancies along the supply chain may need to be eliminated along the way, major mergers have proven to be a more efficient strategy for many alcoholic beverage companies.

Although the merger presents some implications for the US Breweries industry, this is a deal that largely does not concern the domestic market. Both AB InBev and SABMiller regard the North American market as an area that holds minimal growth potential. In 2008, recognizing that the company’s financial prospects were grim due to sluggish domestic performance, Anheuser-Busch welcomed a takeover by Brazilian company InBev for $52.0 billion to gain brand exposure elsewhere across the globe. Today’s planned deal is a continuation of the company’s mindset and will introduce both companies’ brands to an even larger global customer base. With the Global Beer Manufacturing industry projected to grow at a minimal 0.6% annualized rate over the next five years, major mergers have been a practical necessity for global manufacturers to expand revenue and profit margins.

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